Avoid Unpaid Administrative Leave During Investigations

Allen Smith, J.D. By Allen Smith, J.D. March 7, 2022
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​Employers placing workers accused of misconduct on administrative leave typically should make the time off paid, particularly if the accused employee is exempt, to avoid wage and hour as well as discrimination claims. Alternatives to paid administrative leave for alleged wrongdoers often should be considered first.

"I would never recommend a policy that automatically places all employees accused of misconduct or unlawful harassment on administrative leave," said September Rea, an attorney with Polsinelli in Los Angeles.

Alternatives

"To immediately place one party or the other on unpaid administrative leave potentially creates an adverse employment action or punitive conduct before an investigation is even underway," Rea said.

Her preference is to place the accused employee on paid administrative leave or separate the complainant and accused and closely monitor their interactions during the investigation. Monitor all e-mail communications between the complainant and the accused employee, for example, and tell them not to communicate other than in writing during the investigation, she recommended.

"I have had a complainant temporarily report to a different supervisor during the investigation of his current supervisor to avoid retaliation allegations pending the investigation," she noted.

An employer may switch the alleged wrongdoer's shift so the accused employee does not work with the complainant while the employer conducts an investigation, wrote Alba Aviles and Kathleen Caminiti, attorneys with Fisher Phillips in Murray Hill, N.J., in a joint e-mail. "Alternatively, if possible, the alleged wrongdoer could work from home."

When Should the Accused Be Placed on Paid Administrative Leave?

"We generally see the targets of an investigation placed on leave when the individual is accused of criminal activity, ongoing harassment, workplace violence or fraudulent activity," said Natalie Groot, an attorney with Mintz in Boston.

Employers may place the target of an investigation on leave to diffuse tension, separate the complainant and the accused employee, maintain workplace safety, or ensure that the investigation and any witnesses are not subject to any undue influence, she said.

Leave "also can be an effective tool for protecting the well-being of the person who reported the concerns or complaint and messaging to that person and others in the workplace that the company takes such matters seriously," noted J.T. Holt, an attorney with Reed Smith in Pittsburgh.

If the allegation involves suspected theft by a person in a financial control position, an employer may place that person on leave to protect against future loss and allow auditors access to materials without employee interference, said Thomas Johnson II, an attorney with Faegre Drinker in Philadelphia.

The leave often takes effect on the employer's receipt of the complaint and lasts through the duration of the investigation.

If the employer places the employee on leave, it often will make the leave paid because the allegations have not yet been corroborated and the employer wants to avoid litigation.

Such paid administrative leave is different from an unpaid suspension for an employee who is found to have violated company policy, Groot noted.

"Using paid leave is consistent with the idea that leave pending an investigation is not a form of discipline," Johnson said, adding that paid administrative leave also allows employers to avoid potential issues under applicable wage and hour laws, including the Fair Labor Standards Act. "This is an important issue, especially with respect to exempt employees and maintaining their classification."

Exempt employees generally must be paid a fixed amount per workweek that does not change based on their hours worked, Aviles and Caminiti explained. If an exempt employee performs some work during the administrative leave, the employee is entitled to the employee's full salary for the workweek.

Leave Without Pay

Johnson added that when the investigation is expected to be short and the employer is almost certain that the employee placed on leave has engaged in a significant violation of workplace policies or the law, the employer may be more likely to consider using unpaid leave, despite the risks of doing so.

Leave without pay for hourly nonexempt workers is more common than for exempt workers because it does not raise the same wage and hour issues as placing exempt employees on leave, he said. "Employers still need to check to see whether there is any applicable collective bargaining agreement that would limit their ability to place an hourly nonexempt worker on leave," he cautioned.

"In the limited circumstances where unpaid administrative leave is warranted pending an investigation, I recommend that the employer let the accused know that if no unlawful conduct is found at the conclusion of the investigation, the employee will be paid for the time spent on administrative leave," Rea said.

Even if an employee is placed on unpaid leave, the worker must be compensated for the time spent participating in an interview or other aspects of an investigation, said Karla Kraft, an attorney with Stradling in Newport Beach, Calif. "Such compensation should be at the employee's usual rate of compensation," she said.

Paid Administrative Leave for the Complainant

It's far more complicated to put a complainant on paid administrative leave than an accused employee, as placement of a complainant on leave is likely to lead to a retaliation complaint, noted Mike Clarkson, an attorney with Ogletree Deakins in Boston.

Nonetheless, if a complainant is under duress, an employer may offer that employee paid leave or another accommodation pending completion of the investigation, Groot said. "If offered, the employer must be clear that taking leave is an option that the complainant may elect but is not required to take," she said. "If the complainant requests time away from work during the investigation, employers may grant such request."

If a complainant is offered and accepts paid leave, the complainant may want to return to work prior to completion of an investigation, noted Kristen Gallagher, an attorney with McDonald Carano in Las Vegas. "In those circumstances, employers will want to evaluate whether supervisory or reporting structures should be modified in order to avoid, for example, further harassment, discrimination or other alleged conduct of the accused."

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